HASTA LA VISTA MICROSOFT AND THE VISTA OPERATING SYSTEM James R. “Doc” Ogden Kutztown University of Pennsylvania Denise T. Ogden Pennsylvania State University – Lehigh Valley Anatoly Belousov Elsa G. Collins Andrew Geiges Karl Long Kutztown University of Pennsylvania Introduction Jim Allchin, an executive in the Platform Product and Service Group, responsible for operating system development, walked into Bill Gates’ office in July 2004 to deliver bad news about the Longhorn operating system. “It’s not going to work,” said Allchin to Gates, Chairman of the Board and Steve Ballmer, CEO. Longhorn was too complex to run properly. The news got worse with reports that the team would have to start over. Mr. Gates, known for his directness and temperament, insisted the team take more time until everything worked. Upset over the mess, Gates said, “Hey, let's not throw things out we shouldn't throw out. Let's keep things in that we can keep in,” The executives agreed to reserve a final decision until Mr. Ballmer returned from a business trip (Guth, 2005). Over time it became clear that Longhorn had to start from scratch and remove all the bells and whistles that made the system so complex. After Bill Gates reluctantly agreed, the change was announced to Microsoft employees on August 26, 2004 and the new development process began in September 2004 (Guth, 2005). Often technology-oriented businesses have a more difficult time understanding the nuances of marketing because of the complex nature of the products/services. Nevertheless marketing is important and understanding customer needs becomes central to success. Microsoft is an organization that is not known for marketing. In at least one instance they failed to effectively execute a new product introduction, namely the Vista Operating System (originally codenamed Longhorn). Background Microsoft, a name derived from “microcomputer” and ‘software”, was founded April 4, 1975 in Albuquerque, New Mexico, by Bill Gates and Paul Allen. They studied together at Lakeside Prep School. Microsoft’s first success was related to the development of operating systems. In © 2012 Journal of Applied Case Research Vol.10 No. 1 Vista - 45 www.swcra.net 1980, Microsoft signed an agreement with IBM, which resulted in all IBM computers being sold with MS-DOS (“A Success Story Called,” 2008). Recognizing the potential success of its operating system.1, Microsoft was able to market it outside the IBM agreement, which represented a financial success for the company. In 1981, Microsoft became an incorporated business, with Bill Gates as president and CEO, and Paul Allen as Executive Vice President. In 1986, the company relocated to Redmond, Washington and went public. In 1982, Paul Allen developed Hodgkin’s Lymphoma, a form of cancer, and left Microsoft in 1983. Although he distanced himself from the company he remained on the board of directors until he officially resigned in November 2000. At that time he was asked to remain as a senior strategy advisor to the company’s executives (“Paul Allen to Take New Role,” 2000). Microsoft started as a technology-centric company that may not have understood the product planning, development and marketing processes. Microsoft began introducing office products, such as Microsoft Works, and Microsoft Office, with applications like Microsoft Word, Excel, PowerPoint, and others. The Windows Operating System family was released in 1990, and successive versions such as Windows 95, 98, 2000, and XP followed. Successful companies are often in various phases of new product development. Sometimes companies pay more attention to the technological aspects of the product and lose sight of consumer wants, needs and feedback. Early on Microsoft touted the technological superiority of Vista. They were very confident the operating system would be a success. Microsoft’s entry into the business world began with business-to-business marketing. As Microsoft grew they began to sell to the final consumer (retail). This may have led to a lack of understanding the differences in needs and wants between business customers and final consumers. In January 2009, Microsoft Corp. announced the previous quarter’s revenue of $16.63 billion, which represented a two percent (2%) increase over the same period the prior year. The price of a Microsoft share was estimated at $16 (“Microsoft Reports Second-Quarter,” n.d.). Microsoft recognized that the majority of their most popular software programs did not have smooth and speedy launches. They were successful despite the difficulties in part because of their relationships with developers, who appreciated the development tools provided by Microsoft operating systems. In January of 2000, Bill Gates announced he was stepping down as Microsoft’s CEO, leaving his seat to Steven A. Ballmer. Gates remained Chairman of the Board of Directors. 1 An operating system is an interface between hardware and applications running on a computer. The operating system (OS), the core of almost all computers, is responsible for the management of activities and sharing of the resources of the computer. Common contemporary operating systems are Microsoft Windows, Mac OS, Linux, BSD, and Solaris. Microsoft Windows has a significant majority of the market share in the desktop and laptop computer markets. To keep up with the technological changes and user requirements, Microsoft has updated or released new versions of their OS periodically every three to four years. © 2012 Journal of Applied Case Research Vol.10 No. 1 Vista - 46 www.swcra.net Vista Operating System The Vista operating system cost six billion dollars to develop (Kingsley-Hughes, 2010) and was launched January 2007 by Microsoft, Inc. The eighth (8th) operating system under the Windows signature, Vista, was launched with anticipation and expectation from the public, particularly since the operating system release was delayed on several occasions due to technical difficulties (Fried, 2006). The development of Vista was completed November 8, 2006. After initial development of Vista, it was released in stages to computer hardware and software manufacturers, business customers, and retail channels. Vista was released to manufacturing (RTM) in November 2006. Once released to manufacturing, industry partners (PC makers, device manufacturers and software developers) completed applications and other products to make it available for final consumer availability (White, 2006). Microsoft had originally hoped to have the consumer versions of the operating system available worldwide in time for Christmas 2006, but the company needed more time to prepare for the release and the date was pushed back to January 2007. The worldwide launch took place January 30, 2007, after the holiday season, thus missing out on sales during the busiest time of the year. Jim Allchin resigned on the day that Vista was released to consumers, which left Kevin Johnson in charge of the Platforms and Services Division (Microsoft, 2007). Windows XP, Vista’s predecessor, launched in 2001, was patched and serviced on numerous occasions. By launching Vista, Microsoft felt it was rendering the service and effectiveness customers needed and wanted. The launch did not go as Microsoft expected. Due to problems with Vista, many customers who had purchased new computers decided to downgrade to Windows XP instead of buying a new machine with Vista (Trembly, 2008). In a survey conducted by PC World magazine in April 2008, 71 percent of PC users reported they ran Windows XP, versus 17 percent who used Vista. To counterattack these trends, Microsoft announced they would stop selling Windows XP in June 2008. Problems Emerge To develop large software programs, engineers bring together new, unfinished features into a single “build” which is a prototype used to test how these features work together. With up to 4,000 engineers writing code each day, testing the Longhorn build became nearly impossible. The complexity of the build required manually searching through thousands of lines of code to uncover problems. In 2003 Allchin brought on Brian Valentine and Amitabh Srivastava to help turn around Longhorn. Upfront the team knew that rivals such as Google and Mozilla Foundation were developing test versions of software at a faster pace than Microsoft. Mozilla Foundation even beat Microsoft to market with browser features that had been planned for Longhorn. Feature creep is when too many features are added to a product that make it overly complicated. This happened with Vista. The Longhorn team began a new development process in September 2004 to streamline the system (Guth, 2005). The name was changed from Longhorn to Vista in July 2005 and a beta test involving hundreds of thousands of people and companies was undertaken. The first beta test involved the Microsoft Developer Network’s © 2012 Journal of Applied Case Research Vol.10 No. 1 Vista - 47 www.swcra.net (MSDN) 500,000 subscribers and TechNet subscribers. The second beta test was available for download to all users from Microsoft’s website. One of the objectives of Vista was to improve the security of the operating system. According to Bill Gates, "If you look at our investment in the next version of Windows, security would jump out as the thing we've spent the most time on" (Ricadela, 2006). Although there were positive early reviews of Vista, (Cross, 2008) the operating system was also the target of technical criticism. Among the customers’ complaints about Vista, the most relevant were related to the expensive hardware requirements needed to run Vista and the difficulty in defining which Vista version was the best option to purchase (“Microsoft Website,” n.d.). In February 2009, Microsoft had to deploy an emergency patch to counteract a Vista flaw that would allow an attacker to gain control over the windows-based system (Rathbone, 2007). On the subject of Windows’ developmental short-comings, Jim Allchin, Co-President, Platform Products and Services Group, Microsoft, realized they were not meeting customer needs and stated: “I am not sure how the company lost sight of what matters to our customers, business and home, the most, but in my view we lost our way.